After the latest crash I spent some time reading news articles trying to find out if there was a specific reason for the panic. Cryptocurrency market movements, of course, are rarely the result of news. In 2014, every time China said they would ban bitcoins, the market crashed spectacularly. In 2017, when they actually did shut down exchanges, prices rose. This time was no different.

But the tenor of comments in forums and in news article comment sections did seem different. One type of comment is the appearance of a large number of people claiming "I sold my coins when they were worth XXX and I told you so!" The other common type is "This time is different than in the past! There's no adoption and cryptocurrency will fade into obscurity!" It's striking to me how many people seem to forget market conditions during the last bubble, or two bubbles before that.

Does anyone really think that current conditions are in any way remotely comparable to the $32 -> $2 cycle? At that time, it was reasonable to conclude that bitcoins would be a footnote in history. There wasn't anything that could actually be bought with bitcoins, which were one of the only coins, and nobody knew about them. Now, some studies show that as many as 10% of people own some coins, and people like me live almost entirely without spending dollars. Even though many in the 10% probably own small amounts like 0.001 bitcoins, how is it possible that something that 10% of people are at least aware of will suddenly disappear and be worth nothing?

After nine years where there are more and more transactions, more and more coins, more and more public awareness, and more and more services, the default state in the future is continued growth, increased usage, and more bubbles. People who tell you that the default state is increasing usage of government currencies are incorrect, but they can be forgiven in that that hasn't been readily apparent until the past year or so. During the last cycle in 2014, the question for those considering going back to legacy currencies was what event(s) could happen to increase demand and usage of cryptocurrencies. During the current cycle, the question for those considering selling out is what event(s) could happen to stop the cycle from reversing and causing even more widespread adoption. If you can't think of a realistic event that would cause that to happen, then you'll agree with me that the recent panic is completely irrational.

Let's look at a few of the coins to show how irrational the current situation is (in most cases):

Bitcoin Cash

Bitcoin Cash is currently in the best position of all the coins to see massive gains and huge adoption. I use it every day to buy stuff, now that Purse offers it. You actually need to use it to understand how much better it is than the other networks at buying stuff. I think that it's clear by now that the Core's trolls and publicity machine that tried to brand the network as "bcash" didn't work. Nobody calls it bcash, and even if they did, I'm not sure why they thought it would make a difference. I've never actually succeeded in advertising anything in my entire life, despite making many websites and advertising all of them. The product either sells itself or doesn't.

Bitcoin Cash sells itself. People ask me which coins they should buy or spend, and I think that five people now prefer bitcoin cash because that's how I answer. It's only a matter of time before people who use it convince other people to use it.

I still see a lot of people searching hard for a "killer use case" for blockchains. The use case is money. All of the "private blockchains" that are the big rage can be better implemented as databases, and most of the ERC20 planned chains could be better implemented by using another currency as the internal coin of the network. The Bitcoin Cash developers understand that they already have a killer app, that it doesn't need other features, and that it just needs to be usable to the largest number of people possible.

Bitcoin

The other Bitcoin is weirdly holding its value while every other coin continues to plummet. When weird things happen, one should question if someone else knows something that you don't. I think that it's reasonable to conclude that there's some short-term news about bitcoin that could leak out in the next year that will in retrospect make this price behavior seem clear.

In the long-term, Bitcoin has serious issues with the 1MB transaction limit. Many of the coins share a similar issue, which is why I think that the end result will be multiple coins being used interchangeably. The difference with Bitcoin is that the developers are not providing solutions that users want. Nobody is investing significant amounts of money into the Lightning Network because running a node constitutes money transmission. At some point, people will recognize that the money transmission problem is a showstopper and they will either need to abandon the network or make significant changes to it.

Is it possible that the 1MB limit might eventually be seen as too small? Yes, but that will be after the fees hit $40 again. At that point, the usage will just expand to other coins, because the next bubble will be more rapid than the last. Once people (like us) implement other coins, they don't change back - that's why bitcoin is less used for transactions now than it was last year.

Bitcoin might survive for a long time as the "store of value" that the Core is pushing and could earn people some money, just not as much as other coins will. I just don't see why people would implement such a complicated solution like the Lightning Network when there is already a network effect for existing wallets and exchanges.

Ethereum

Ethereum is getting killed, and the panic is completely irrational. There's not much else to be said here.

If we want a little more discussion, ETH does face some legitimate issues. Buterin wasted far too much time trying to get proof-of-stake implemented. I think that, despite actually being a reasonable person who treats other people well, he made a similar mistake to the Core in that he didn't look at what users actually want. Most of the coins, with the notable exception of bitcoin cash, are wasting valuable development time implementing all sorts of rarely used features without focusing on the one feature that is most necessary: increasing capacity. Constance stopped using cryptokitties not because proof-of-stake isn't available, but because her purchase of her first kitty was never confirmed.

It currently cost about $1,000 to set up our ETH nodes. Our development node, which is testing the ETH mining that will release in three weeks, cost another $1,000. Every node shouldn't have to process every computation; instead, a folding@home-like solution should be used where there were three copies of every work unit sent out, and once two identical solutions were received, the final state is recorded (in ETH's case, sent to everyone.)

But ETH has decent, honorable people in charge. They understand the issues and are working to fix them. That's why there is a brighter future for ETH than for BTC.

Ethereum Classic

ETC is valuable simply because it exists. Anything that runs on ETH can be easily moved over to ETC. Coinbase is set to offer it in the future.

People who are willing to look the other way from developers who created millions of dollars for criminals through their fork will find money to be made in ETC. Until ETH is able to refocus all of its effort on increasing capacity, ETC will probably trend towards a 1:1 ratio with ETH. It will never surpass it, because the initiative and newest features will always be with ETH.

ERC20 tokens and converted tokens

This category of coins includes ERC20 tokens that are intended to become used as a currency when the network being developed is released, like storj. There are also many previous tokens like VeChain-THOR, which were converted to a separate network at the project's launch.

I never buy any of these tokens. First, there is a lot of money held by developers, and they are not fairly distributed. Second, they aren't intended to be currencies. People may someday accept Litecoins at Subway; they won't accept storj coins. The storj team itself doesn't actively advocate the use of its coins other than to buy storage on its network. Not only that, but unlike other coins, there is actually a set criteria for when they become worthless - if the project fails. As I stated in the last article at viewtopic.php?f=11&t=5826, 90% of the coins we have ever offered over five years still have some value.

Dogecoins have no defined purpose, so they will probably see more bubbles even if they become nearly worthless before then. ERC20 tokens designated for a specific project have an unnecessary added risk of the project's failure.

Litecoins

Litecoins, like ETC, have value simply because they are there. They remain the most common base pair at exchanges.

But litecoins had the potential to take over instead of bitcoin cash, and they went with Segregated Witness and the Lightning Network instead. Given Charlie Lee's behavior, I at least simply don't trust him to honor his word and increase the block size of litecoins when the blocks are half full. Since all the other miners follow his word as the golden rule, they will never expand if he opposes it. In the meantime, Bitcoin Cash slowly eats litecoin's share.

I'm not going to sell any yet, because litecoins will certainly be worth more than they are now. However, with more BCH base pairs being added to exchanges, the future for LTC is the the most grim of the original coins. That's one of the reasons we are working on ETH and XMR mining - because we want to diversify away from scrypt in the case that LTC continues to underperform.

Conclusion

In conclusion, the sudden influx of people claiming that this cycle is different are wrong, unless they can point out a specific event that will stop what's been happening for nine years. Since I haven't seen any presented other than irrational panic, the same type of people who disputed my claim that bitcoins would be worth $980 and litecoins $50 are now saying that these coins will never recover. During the next bubble, they'll say that bitcoins could never be worth at little as $20,000 again.

If conditions get worse than they were during the $32 -> $2 cycle, then I'll start to worry. Short of a catastrophic mathematical proof that every cryptocurrency has a security flaw in a way that cannot be coded around, matching that time is hard to imagine.

good post, Steve. i agree with everything you said. i have been a big proponent of BCH since it's inception and continue to be with every new development the dev team comes out with. the only area i may differ with you is, and it probably really isn't even a disagreement, is that BTC's future is as an international settlement vehicle. and if that happens, the price of one BTC will go through the roof and just might be a better investment than some of the others.

Foxx wrote:good post, Steve. i agree with everything you said. i have been a big proponent of BCH since it's inception and continue to be with every new development the dev team comes out with. the only area i may differ with you is, and it probably really isn't even a disagreement, is that BTC's future is as an international settlement vehicle. and if that happens, the price of one BTC will go through the roof and just might be a better investment than some of the others.

I am going to PM you regarding your post.

thank you again, good stuff.

ETA: i see you have your PM's turned off. how to get in touch??

Submit a support ticket. I turned PMs off because there were too many messages coming through that should have been directed at Chris, and it was rude of me to not reply to them.

Steve Sokolowski wrote:Let's look at a few of the coins to show how irrational the current situation is (in most cases):

Bitcoin Cash

Bitcoin Cash is currently in the best position of all the coins to see massive gains and huge adoption. I use it every day to buy stuff, now that Purse offers it. You actually need to use it to understand how much better it is than the other networks at buying stuff. I think that it's clear by now that the Core's trolls and publicity machine that tried to brand the network as "bcash" didn't work. Nobody calls it bcash, and even if they did, I'm not sure why they thought it would make a difference. I've never actually succeeded in advertising anything in my entire life, despite making many websites and advertising all of them. The product either sells itself or doesn't.

Bitcoin Cash sells itself. People ask me which coins they should buy or spend, and I think that five people now prefer bitcoin cash because that's how I answer. It's only a matter of time before people who use it convince other people to use it.

I still see a lot of people searching hard for a "killer use case" for blockchains. The use case is money. All of the "private blockchains" that are the big rage can be better implemented as databases, and most of the ERC20 planned chains could be better implemented by using another currency as the internal coin of the network. The Bitcoin Cash developers understand that they already have a killer app, that it doesn't need other features, and that it just needs to be usable to the largest number of people possible.

Steve,

I really appreciate you sharing your experience and view on the future of cryptocurrency, and your view on particular coins. THANK YOU.

I am curious, do you have any opinions or observations regarding the hard fork of Bitcoin Cash coming up, given your above position.

Is prohashing doing anything around this fork? (stopping payments or mining) for example.

Steve Sokolowski wrote:Let's look at a few of the coins to show how irrational the current situation is (in most cases):

Bitcoin Cash

Bitcoin Cash is currently in the best position of all the coins to see massive gains and huge adoption. I use it every day to buy stuff, now that Purse offers it. You actually need to use it to understand how much better it is than the other networks at buying stuff. I think that it's clear by now that the Core's trolls and publicity machine that tried to brand the network as "bcash" didn't work. Nobody calls it bcash, and even if they did, I'm not sure why they thought it would make a difference. I've never actually succeeded in advertising anything in my entire life, despite making many websites and advertising all of them. The product either sells itself or doesn't.

Bitcoin Cash sells itself. People ask me which coins they should buy or spend, and I think that five people now prefer bitcoin cash because that's how I answer. It's only a matter of time before people who use it convince other people to use it.

I still see a lot of people searching hard for a "killer use case" for blockchains. The use case is money. All of the "private blockchains" that are the big rage can be better implemented as databases, and most of the ERC20 planned chains could be better implemented by using another currency as the internal coin of the network. The Bitcoin Cash developers understand that they already have a killer app, that it doesn't need other features, and that it just needs to be usable to the largest number of people possible.

Steve,

I really appreciate you sharing your experience and view on the future of cryptocurrency, and your view on particular coins. THANK YOU.

I am curious, do you have any opinions or observations regarding the hard fork of Bitcoin Cash coming up, given your above position.

Is prohashing doing anything around this fork? (stopping payments or mining) for example.

In conclusion, the sudden influx of people claiming that this cycle is different are wrong, unless they can point out a specific event that will stop what's been happening for nine years. Since I haven't seen any presented other than irrational panic, the same type of people who disputed my claim that bitcoins would be worth $980 and litecoins $50 are now saying that these coins will never recover. During the next bubble, they'll say that bitcoins could never be worth at little as $20,000 again.

If conditions get worse than they were during the $32 -> $2 cycle, then I'll start to worry. Short of a catastrophic mathematical proof that every cryptocurrency has a security flaw in a way that cannot be coded around, matching that time is hard to imagine.

Steve, curious here with this latest carnage in pricing. i read another post where you thought you might have to revisit that prognostication of $980. do you still feel a retracement to three digits is in the cards?

Steve Sokolowski wrote:ConclusionIn conclusion, the sudden influx of people claiming that this cycle is different are wrong, unless they can point out a specific event that will stop what's been happening for nine years. Since I haven't seen any presented other than irrational panic, the same type of people who disputed my claim that bitcoins would be worth $980 and litecoins $50 are now saying that these coins will never recover. During the next bubble, they'll say that bitcoins could never be worth at little as $20,000 again.

If conditions get worse than they were during the $32 -> $2 cycle, then I'll start to worry. Short of a catastrophic mathematical proof that every cryptocurrency has a security flaw in a way that cannot be coded around, matching that time is hard to imagine.

Just wondering if in lite of prices and the bitcoincash split-war, the trade-war, the strong USD$, if you have any updated predictions.

Do you think if the prices go any further there will be a major tipping point where enough people shut down to impact the system?

If so at what point is that tipping point? I heard the breakeven on BTC mining was $5700, as we are now solidly below that, just wondering how much lower you think it will go before massive groups shut down to conserve money if they cant sell for profit in the very near future.